Brussels closes restructuring plan for Novo Banco

Gravy train of public money “stops now”

The European Commission informed the Portuguese state on Monday of its intention to consider the restructuring process of Novo Banco, which began in 2017, as completed by 31 December 2022, the finance ministry has announced.

All reports today have repeated the mantra that this “closes a very important stage for the stabilisation of the national financial system, successfully concluding the process that ensured the viability of this important national credit institution”, stressing that “the Portuguese banking system begins a new cycle: no Portuguese bank is in the process of restructuring approved and monitored by the European Commission”.

But the cost of Novo Banco’s restructuring is not mentioned: the ‘ruinous deal’ that saw the State saddled with bailing the bank out by even more billions of euros than it has ploughed into trouble torn flagship airline TAP.

Statements today focus on the Portuguese banking system having “strengthened its capital and improved the quality of its assets, registering a very positive evolution of the ‘Common Equity Tier 1’ (‘CET1’) ratio from 12.1% at the end of 2015, to 14.3% at the end of September 2022 (latest ECB data available) (…) the improvements verified are indispensable to ensure the continuity of financing to families and companies.”

“This is another important piece of news in the international context that reinforces Portugal’s external economic and financial credibility”, says the finance ministry.

As Lusa news agency explains: “With the completion of the Novo Banco restructuring process, the executive points out that “the possibility of activating the mechanism, subsidiary and exceptional, called ‘Capital Backstop’, provided for in the European Commission Decision of 2017, will no longer be in force.”

“According to this mechanism, and while the restructuring plan was in force, the Portuguese State could be faced, albeit in exceptional circumstances, with the need to contribute significant additional funds. This will no longer be the case”.

The gravy train has finally come to a halt.

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